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FintechOpen Banking

Competition Among the Einsteins and Edisons of Fintech

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The world’s greatest inventions don’t exist in a vacuum. They cannot be attributed to one person or company. They compete with each other and build on past learnings. Innovation thrives with competition.

Even now, the Edison Awards’ discuss the importance of healthy competition in order to innovate. History hasn’t removed this necessity to compete, innovate faster, discover something first, or use and build on the learnings of others. The article references a PwC survey that said that 80% of CEOs believed that innovation drives efficiencies and leads to a competitive advantage. For every Steve Jobs, there must be a Bill Gates.   

The same goes for the financial technology (fintech) industry. Healthy competition fuels innovation. 

Healthy competition and innovation in the financial industry

But, just like how Edison published his findings and many built upon his inventions, fintech companies today require this same openness in order to compete. They need data and access to it. They need open collaborations. Permission to innovate. Permission to create a better world (or product, service, or experience) for the people.  

In order for the fintech industry to innovate, compete, and build on the learnings of others—just like Edison, Westinghouse, and Tesla did in the late 1800s—open banking must exist. 

Open banking and competing to innovate

We wrote on the meaning and importance of open banking in the past, but to save you time, here’s what it means. Open banking is the sharing of data. It is the collaborative innovation between banks and innovators such as agile fintech companies. Open banking gives consumers the power to give innovators access to their data. Without this permission and data, companies are innovating in the dark with missing information and a lack of access. 

Without open banking, competitive innovation is challenging at best and nearly impossible at worst. But beyond just the lack of innovation that this could trigger, without open banking or similar means to get data and information, the functionality of millions of applications could start to fail. 

Innovation and functionality in fintech without open banking 

In fact, in a recent post called Financial Wellness Apps Bank On Credential-Based​ Authentication, we discussed findings that the Financial Data and Technology Association (FDATA) of North America published in January 2020. The data showed that 1.8 billion fintech consumer accounts in the U.S. would lose functionality to financial apps they depend on without open banking and similar competitive options. 

Broken down into parts, the impacted consumer and small business use cases in the U.S. alone would include 530 million loan accounts or fintech apps for retirement planning, financial wellness, and debt reduction. Over 310 million accounts that help people manage and pay their account balances on time or provide overdraft protection could lose functionality. More than 330 million investment accounts and 210 million accounts that help Americans move and save money could no longer work. This is just the tip of the iceberg.

Demand and competition fuels the unstoppable innovation train

Back when Edison invented the lightbulb, people used candles and fire to light and warm their homes. When the richest among them were given the opportunity to use lightbulbs powered by electricity, lightbulbs that they paid for and chose to use. They were a welcome novelty. Soon they became more efficient, effective, cheaper, and accessible. Consumers still had the choice to bring electric light and power into their homes, but the improvement to their way of life was dramatic.

This same freedom of choice for consumers must continue to exist today—as does the need for healthy competition among innovators (and inventors). People use financial applications to improve their lives and financial wellness. They rely on them and need them to function properly. Without open banking and the collaborative and competitive innovation and sharing of information, what does the future of fintech hold for us? 

Open banking gives consumers a choice over what innovations, products, and services they support. Open banking provides data and learnings and necessary for innovation and healthy competition. Without open banking—a regulation that only the U.K. is currently blessed with—only those with the information can innovate and compete. Currently, this is financial institutions. Unless these major banks of the world collaborate with innovators, which they often do, there won’t be any healthy competition, inventions, or progress. 

Without healthy competition in the financial industry, we’d all be signing cheques in the dark. 

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FintechOnline Payments

Canada’s in Love With Cashless Payments

Cashless Payments

This post is based on the comprehensive findings published by Payments Canada in its annual 2019 Canadian Payment Methods and Trends report

Canada exchanges almost $210 billion worth of payments and financial transactions on average every business day. More of these transactions take place electronically each year as Canadian payment systems and business processes go digital. According to Payments Canada’s 2019 Canadian Payment Methods and Trends report for 2018, the payment market grew to 21.1 billion transactions worth more than $9.9 trillion. 

Here is a look at the most significant findings and statistics for both Point-of-Sale (POS) and remote transactions in Canada in 2018.

Canada’s cashless payments: Point-of-Sale (POS) stats

Point-of-sale (POS) transactions take place either physically or virtually via online and e-commerce vendors and payees, brick and mortar merchants, or mobile and in-apps. This space is undergoing massive growth, evolving largely because of electronic payments and to support mobile e-commerce. 

Fast facts on Canada’s POS transaction growth in 2018 

The big picture of POS in Canada

  1. The total volume of POS transactions in 2018 was 15.7 billion.
  2. The total value of POS transactions in 2018 was over $856 billion.
  3. The average POS transaction value was $54 in 2018.
  4. In the last five years, POS volume has increased by 5% and value by almost 25%.

Types of POS payments: Debit is king in Canada

  1. Debit cards are now the most widely used payment method at 6 billion transactions, overtaking cash transaction volume for the first time in 2017. 
  2. Contactless debit made up 60% of the total volume of contactless transactions and 35% of the value. The average debit transaction was $42.
  3. Credit cards are the second-most-used POS payment method in volume and had more transactional value than all other POS methods combined in 2018.
  4. Despite 4.5 billion POS cash transactions—it continues to decline every year, down 40% from 2013.

Mobile wallets and contactless transactions

  1. Mobile device and contactless card payments totalled 4.1 billion transactions (a 30% increase since 2017) and $129.9 billion value in 2018.
  2. More than one-third of Canadians used a tablet, phone or device to make a purchase in 2018.
  3. Canadians who use credit contactless payments tend to be younger, have higher earnings and live in British Columbia and Ontario.

E-commerce POS and credit cards

  1. Approximately 20% of all of Canada’s shopping has migrated to e-commerce.
  2. Credit card usage is faster growing than debit because of rewards points and the perceived ease-of-use and security for e-commerce.
  3. Canadian online merchants and businesses lack diverse payment options for e-commerce.

Canadian businesses love remote payments (and EFTs)

Remote transactions and payments are all those that don’t require a POS device or application. This often means that payors rely on a third party such as a bank or financial technology partner to route payments through Electronic Funds Transfers (EFT), cheques, and other payments. A few examples include bill payments, direct deposits, pre-authorized payments, and P2P and B2B transactions. 

Fast facts about remote payments in Canada

  1. There were a total of more than 4.5 billion remote transactions in 2018.
  2. Remote transactions totalled approximately $9 trillion in value in 2018.
  3. These transactions make up 91% of the total Canadian transaction value, but only 25% of the total volume.
  4. The average remote transaction value was $1,993.

Electronic Funds Transfer (EFT) transactions: Number one for businesses

  1. EFT transactions are the leading payment method for businesses both in value and volume—and overtook cheques for the first time in 2018.
  2. EFT growth lessened from its growth spurt in 2017 but accounts for 49% of remote payment value.
  3. Electronic payments totalled 73% of the total payments volume and 59% of value in 2018.
  4. The average EFT transaction size was $1,718 in 2018. 
  5. EFT and cheques dominate remote payments in Canada totalling $8.8 trillion in combined value, but credit cards and online transfers are growing quickly.

In the end, Canadian businesses are continuing to move all systems, including payments, to digital. While they are not letting go of paper cheques and cash as quickly as consumers are, they are increasingly adopting electronic payments. Business owners and consumers will always seek more efficient, faster, and easier ways to make payments. 

Learn more about VoPay and how we’re digitizing payments in Canada.

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